www.canada.com Chris Varcoe Calgary Herald Tuesday, January 21, 2003 CREDIT: Calgary Herald Archive   Nine of the 50 largest companies traded in Toronto are energy firms.

ulked up by strong oil and natural gas prices, at least two Canadian energy companies are set to become billionaires in the profit department.

Canadian petroleum producers will begin releasing 2002 financial results today and two oil companies -- Imperial Oil Ltd. and EnCana Corp. -- are expected to post more than $1 billion in net earnings.

Industry analysts say a string of mergers, along with relatively strong commodity prices, have Imperial, EnCana, and possibly Petro-Canada poised to join the domain of Canada's biggest banks and blue-chip businesses.

"From the consumers' standpoint, it's wow, how much is enough," said energy analyst Wilf Gobert of Peters & Co. "But when I put my financial analyst's hat on here, the amount of profit doesn't matter. It's a question of what your rate of return is."

While commodity prices were low at the start of 2002, oil rose throughout the year due to mounting tensions in the Middle East and political instability choking off exports from Venezuela.

Crude oil traded on the New York Mercantile Exchange averaged $26.20 US a barrel during 2002, up one per cent from the previous year and surging above $30 in December.

Spot prices for western Canadian natural gas averaged $4.12 a gigajoule, down 24 per cent from the previous year, but rallying from a low point during the summer to a recent two-year high.

With a spate of mergers and takeovers creating large-scale companies such as EnCana -- the biggest independent producer in the world -- it's little surprise the sector's heavyweights will top $1 billion in earnings, said Patricia Mohr, vice-president of economics at Scotiabank.

"These are very large companies. I wouldn't sneeze at that," she said. "I'm sure the results will look good."

Gobert forecasts Imperial Oil, Canada's largest integrated oil company, to make about $1.1 billion in 2002. EnCana -- created by the merger of Alberta Energy Co. Ltd. and PanCanadian Energy Corp. -- should earn $1.37 billion for the entire year.

Petro-Canada, which bulked up significantly in early 2002 with its $3.2-billion takeover of Veba Oil & Gas, is projected to make between $923 million and $964 million, but could "have a shot" at a billion dollars in profits depending upon unusual charges, Gobert added.

"In Canada, it's been a long time since we've had this many companies that are this big -- in fact, probably never," he said.

Gobert noted that nine of the 50 largest companies traded on the Toronto Stock Exchange are energy firms.

The best year on oilpatch record, 2000, saw Imperial post net earnings of $1.4 billion, while PanCanadian -- then controlled by Canadian Pacific Ltd. -- made $1 billion.

Suncor Energy Ltd. is set to release results today and fourth-quarter figures are also expected to show the influence of rising commodity prices.

Oil jumped 38 per cent during the fourth quarter compared with the same period in 2001, averaging $28.33 US a barrel. And heavy oil prices were particularly strong.

Natural gas prices in Western Canada gained 67 per cent to average $5.38 per gigajoule for the three months ending Dec. 31, putting gas-leveraged companies in a profitable position.

However, many companies were challenged to increase gas output in the mature Western Canadian Sedimentary Basin, said analyst Dan Tsubouchi of Griffith McBurney Partners.

"We think there might be some minor disappointment on production numbers," Tsubouchi said. "It's very difficult for this industry to build (gas) supply in a maturing basin."

For integrated companies that refine and market petroleum products, another issue is the tight refining margins witnessed during parts of the year.

"We're going to see continued lack of profitability or difficulties in refining," said analyst Kate Warne of Edwards Jones in St. Louis.

varcoec@theherald.southam.ca

By the Numbers

Earnings expectations for 2002, in millions of dollars, followed by percentage change over the year before. (Earnings are net, and if unusual items are added, figures will be higher, as companies had negative foreign exchange transactions.)

EnCana 1,393 7%

Imperial Oil 1,127 -9%

Petro-Canada 923 2%

Talisman 858 13%

Husky 802 14%

Suncor Energy 709 96%

Canadian Natural 571 -18%

Shell Canada 526 -48%

Nexen 410 0%

Penn West 158 -35%

Source: Peters & Co.

This story features a factbox "By the Numbers".

www.channelnewsasia.com First created : 21 January 2003 2051 hrs (SST) 1251 hrs (GMT) Last modified : 21 January 2003 2303 hrs (SST) 1503 hrs (GMT)

The Organization of Petroleum Exporting Countries may have to agree to a further production hike when it convenes on March 11 as markets have not responded to a decision by the cartel to boost output, said OPEC President Abdullah bin Hamad al-Attiyah on Tuesday.

"All options are open," he replied when asked if the Organization of Petroleum Exporting Countries could take further action to curb prices at a ministerial meeting in Vienna March 11.Advertisement

On Monday, oil prices climbed above US$30 a barrel in London, apparently indifferent to OPEC's decision in mid-January to increase production by 1.5 million barrels a day from next month.

The cartel's decision to raise production was a move taken to shore up market confidence in the face of international political tension.

"The problem is that the market is not receiving that," Mr Abdullah, who is also Qatar's energy and industry minister, told reporters following the inauguration outside Doha of a new petrochemical plant.

"The market is under a lot of political and psychological motivations, such as Venezuela and Iraq," he added.

Industry analysts have warned that war in Iraq and continuing labour unrest in Venezuela could deprive the global oil market of some five million barrels a day.

www.middle-east-online.com First Published 2003-01-21, Last Updated 2003-01-21 12:10:25

The oil market is under a lot of political and psychological motivations

OPEC President believes oil market will stabilize in coming months as oil prices climbing over $30/barrel.

DOHA - World oil markets have yet to respond to an OPEC decision to boost output and the cartel could therefore agree to a further production hike when it convenes March 11, OPEC President Abdullah bin Hamad al-Attiyah said Tuesday.

"All options are open," Attiyah said when asked if the Organization of Petroleum Exporting Countries could take further action to curb prices at a ministerial meeting in Vienna March 11.

Oil prices climbed above 30 dollars a barrel in London on Monday, apparently indifferent to OPEC's decision in mid-January to increase production by 1.5 million barrels a day from next month - a move taken to shore up market confidence in the face of international political tension.

"The problem is that the market is not receiving that," Attiyah, who is also Qatar's energy and industry minister, told reporters following the inauguration outside Doha of a new petrochemical plant.

"The market is under a lot of political and psychological motivations, such as Venezuela and Iraq."

Industry analysts have warned that war in Iraq and continuing labor unrest in Venezuela could deprive the global oil market of some five million barrels a day.

Attiyah, who stressed that OPEC is "watching the market very carefully," nonetheless added: "We believe it will stabilize in the coming months."

news.bbc.co.uk Tuesday, 21 January, 2003, 11:53 GMT

Worries over cuts in oil supplies boost the price

The price of oil touched two-year highs on Tuesday, as the build-up of troops in the Gulf tested the nerves of oil traders.

With the prospect of a war in Iraq becoming ever more likely, trading remained volatile as fears of an oil shortage pushed up prices.

The US Secretary of State, Colin Powell, told the United Nations Security Council that it should not be scared into "impotence" when it came to dealing with Iraq.

The markets are still very edgy with both Venezuela and Iraq remaining the key issues

Simon Games-Thomas Oil analyst

In London, Brent crude edged up 37 cents to $31.02 a barrel, while US light crude rose 44 cents to $34.35, its highest since December 2000.

A seven-week-old general strike in Venezuela has also limited oil exports and helped boost the price.

"The markets are still very edgy with both Venezuela and Iraq remaining the key issues," said independent oil analyst Simon Games-Thomas.

"Prices appear destined to trade higher given the current set of drivers and $35 beckons inexorably in the short term," Mr Games-Thomas added.

Shredded nerves

The shooting of contractors working for the US military in Kuwait, resulting in one fatality, also added to the pressure.

A report from Hans Blix could affect prices

Oil traders are concerned that any war in Iraq would limit supplies, despite the resolve of the oil cartel, Opec, to maintain the flow.

Just over a week ago, Opec agreed to increase official production after an emergency meeting in Vienna.

"Opec is trying to send a very strong message that it will do its utmost to stabilise demand and supply," said the cartel's president Abdullah bin Hamad al-Attiyah.

The release of a major report by Chief UN weapons inspector Hans Blix next Monday will provide further direction for the oil price.

The evaluation of the report on 29 January could provide more clues as to the likelihood of a war.

Tension builds

Both the US and the UK are planning a major deployment of forces in the Gulf.

On Tuesday, the US announced it would send nearly 37,000 more personnel to the area in preparation for possible military action.

Meanwhile, the nationwide strike in Venezuela - designed to bring about the resignation of President Hugo Chavez - is strangling oil supplies.

As the world's fifth-largest exporter, Venezuela accounts for 13% of US petroleum imports.

A shortfall in supplies has cut US commercial crude stockpiles to 26-year lows.

news.ft.com By Gordon Smith in London Published: January 21 2003 12:18 | Last Updated: January 21 2003 12:18

Crude futures rose sharply in London on Tuesday as concerns over the stability of the Middle East rose after a US citizen was shot dead in Kuwait in a suspected terrorist attack and US and UK troop deployments to the region increased war fears.

The IPE March Brent contract rose 50 cents to $31.21 while the US crude hit a two-year high of $34.50 in electronic trade. On Monday US markets were closed for Martin Luther King day.

Earlier the US confirmed a civilian contractor working on a US military base in Kuwait had been shot dead and another wounded in what it said was a terrorist attack.

The killing came as tension in the Gulf mounted after the British government announced it was committing 30,000 troops to the region. The news came ahead of the interim report from Hans Blix, the UN's chief weapons inspector, to the UN security council next week.

Oil traders remain concerned that any conflict in the Gulf will coincide with the ongoing strike in Venezuela and restrict supplies even further.

The Venezuelan strike, in its 51st day, showed no signs of ending as the battle between supporters of the Chavez government and the strikers intensified.

On Sunday president Hugo Chavez said he was "winning the war on oil" and that oil output had risen to 1.2m barrels per day. But striking workers claimed the actual output was at only half of the president's claimed levels.

The strike has slashed Venezuelan output by about 80 per cent from its pre-strike levels of between 2.5m and 3m barrels per day.

The gold spot price drifted lower ahead of the reopening of trade in the US. The precious metal fixed at $355.20 in morning trade on the London Metal Exchange, down from the previous session's fix of $355.85.

Gold remained close to recent highs however as worries about possible war in the Gulf persisted and the dollar, which traditionally has an inverse relationship with gold, traded just above multi-year lows against other leading currencies.